Chapter 4
Creating a Military Class: From Arbitrator to Guardian
When the military returned to politics in 1977 under General Zia ul-Haq, it was determined to institutionalize its control of the state. Having learned from the populist movement of the late 1960s that threatened its supremacy, the military recognized it needed to either coerce civil society into submission or negotiate with members of the dominant classes.
Zia employed four key strategies to neutralize opposition and consolidate power. First, he used coercion through media censorship, banning unions, and harsh punishments. Second, he co-opted the religious right, establishing Islamic institutions and encouraging madrassas to recruit fighters for Afghanistan. Third, the regime created alternative political structures through the "local bodies system" held on non-party basis, undermining national political parties. Fourth, Zia built alliances with big business, undoing Bhutto's nationalization policies and elevating figures like Nawaz Sharif as civilian alternatives to opposition leadership.
Though nominal democracy returned after Zia's death in 1988, the period from 1988-99 saw unstable democracy with eight prime ministers in ten years. The military acted as the ultimate arbiter, removing governments that challenged its authority. Politicians continued approaching the military to tip the balance against opponents, seemingly oblivious to how this undermined democracy. Military officers came to believe their organizational discipline made them more capable of governance than politicians.
When the military returned to direct power in 1999 under General Musharraf, it marked a fundamental shift from the military as temporary arbitrator to permanent parent-guardian of the state. The National Security Council Act of 2004 formalized the military's role in governance through a council comprising four military officers and eight civilians, following the Turkish model where such institutionalization enhanced military officers' political and economic strength.
By the early 21st century, the military fraternity had penetrated all levels of society and economy, with over 1,000 serving and retired officers in middle and senior management positions across institutions. The military zealously protects its commercial interests, with retired members and the defense establishment actively discouraging criticism of their economic stakes. This reflects the military's evolution into an independent class with political clout to establish control over state resources.
Chapter 5
Inside the Military's Economic Empire
Pakistan's military operates a formidable economic empire with a decentralized structure functioning at three distinct levels across agriculture, manufacturing, and service sectors. Though critics often focus on its four main subsidiaries (Fauji Foundation, Army Welfare Trust, Shaheen Foundation, and Bahria Foundation), the economic empire extends far beyond these organizations, penetrating deeply into Pakistan's commercial and industrial landscape.
At the first level, the military directly engages in profit-making activities through major public-sector organizations that dominate key economic sectors. The National Logistic Cell (NLC), created in 1978, has evolved into Asia's largest public-sector transportation company, operating a fleet of 1,689 vehicles and controlling crucial supply chains across the country. While nominally attached to the Ministry of Planning and Development, the organization is effectively controlled by the army, with senior military officers occupying key management positions. The Frontier Works Organization (FWO), established in 1966 to construct the Karakoram Highway, has transformed from a specialized construction unit into Pakistan's largest contractor for road construction and toll collection, managing projects worth billions of rupees annually. The Special Communication Organization (SCO) develops telecommunications networks in strategic regions, particularly in Azad Kashmir and Northern Areas, effectively monopolizing communications infrastructure in these territories.
The second level encompasses four military subsidiaries that represent the most transparent segment of Milbus, though their operations remain partially shielded from public scrutiny. The Fauji Foundation, established in 1954 using 6 million from Britain's post-War Services Reconstruction Fund, has grown into one of Pakistan's largest business conglomerates with declared assets of Rs.9.8 billion (US$169 million). It operates 25 diverse projects spanning manufacturing, insurance, IT, banking, and education sectors, employing over 6,500 people directly. The Army Welfare Trust, created in 1971, manages 41 projects worth approximately Rs.50 billion (US$862.1 million), including textile mills, cement plants, and commercial banks. The Shaheen Foundation (Air Force) specializes in aviation services and real estate development, while the Bahria Foundation (Navy) focuses on maritime logistics, shipping, and commercial property development - both organizations leveraging their respective service expertise for commercial gain.
The third level represents an extensive network of personal benefits provided to individual military personnel through the institution's patron-client relationship structure. These benefits include preferential access to prime urban and agricultural land at substantially below-market rates, generous subsidies for property development, guaranteed post-retirement employment in military-owned enterprises, and lucrative business opportunities through military connections. Under Musharraf's regime, approximately 4,000-5,000 jobs were provided to military personnel in government departments without open competition, creating a parallel career track for service members.
This expansive economic empire gives the military unprecedented influence over Pakistan's economy while operating largely outside public scrutiny and civilian oversight. The military's business ventures consistently leverage their institutional advantages - including access to state resources, regulatory exemptions, and preferential treatment in government contracts - to outcompete civilian enterprises. This creates significant market distortions and raises concerns about economic efficiency and fair competition. The military's commercial interests also influence policy decisions, particularly in areas like defense spending, infrastructure development, and land use, often prioritizing institutional benefits over national economic objectives.
Chapter 6
The Military's Land Acquisition: Creating New Feudal Lords
Pakistan's generals have amassed personal fortunes worth between Rs.150-400 million (US$2.59-6.90 million), primarily through systematic exploitation of urban and rural land. The military has become one of Pakistan's largest landowners, controlling approximately 11.58 million acres - about 12% of total state land. Unlike other government institutions, the armed forces uniquely can convert state land from official to private purposes and institutionalize land distribution among their fraternity.
The military controls about 6.9 million acres of rural land, with approximately 6.8 million acres distributed to officers and non-officers for personal use - a privilege no other government department enjoys. The mass distribution of land has created a class of military agriculturists, with major-generals and above receiving 50 acres, plus additional land granted for gallantry medals.
Senior generals receive the greatest benefits, including larger holdings and indirect subsidies like technical assistance, water access, and farm-to-market roads. Research visits to farms owned by General Musharraf, General Zaidi, and Admiral Mirza revealed serving soldiers guarding and working these properties - reminiscent of private armies or serfdom. Officers also receive subsidized agricultural inputs transported on military vehicles, making their land development costs minimal compared to ordinary soldiers or peasants.
The military's expansion into urban real estate has brought unprecedented attention to its economic empire. As one of the dominant players in this sector, military housing schemes in major cities command premium prices and attract massive speculative capital. Since 1999, the armed forces have owned the largest share of urban real estate in Pakistan, with expansion occurring in two phases: initial growth in the 1980s coinciding with capital inflow, and explosive growth after 1999 when Pakistan received both legal and illegal money from expatriates and Islamic states.
The Defence Housing Authorities represent the military's most significant real estate ventures, established through direct use of army political influence. The military's extraordinary profits stem from acquiring land at artificially low prices through preferential access to information and subtle coercion of original landowners. The profitability is staggering - the AWT housing scheme at Sanjiani earned approximately Rs.24 billion ($413.79 million) on an investment of Rs.720 million ($12.41 million).
Through systematic exploitation of state land, Pakistan's military has joined the country's dominant classes as a major land baron, treating ordinary soldiers and indigenous people no differently than traditional feudal lords treat their subjects. This land acquisition not only enriches the officer corps but reinforces the military's political power by creating economic dependencies and patronage networks across society.
Chapter 7
Military Welfare: Unequal Benefits and Regional Disparities
In Pakistan, military service stands as one of the most coveted career paths, particularly for young men from military families and the lower-middle class who view it as a gateway to social advancement. The military's exceptional appeal in the job market stems from its considerable political influence and comprehensive welfare system that extends far beyond basic employment benefits. The organization has cultivated a reputation as the most reliable employer in the country, offering not just job security but a complete lifestyle package that includes housing, healthcare, education, and post-retirement benefits that far exceed those available in the civilian sector.
The military welfare system encompasses approximately 9.1 million beneficiaries, including retired personnel, their dependants, and immediate family members. The disparity between military and civilian pensions is particularly striking - the government allocates Rs.30-33 billion annually for military pensions compared to merely Rs.6 billion for civilian pensions. This substantial difference exists because military personnel receive significantly higher salaries, special allowances, and additional benefits throughout their service. These benefits include subsidized housing schemes, preferential access to urban plots, agricultural land grants, and priority placement in government positions after retirement.
The Fauji Foundation (FF) exemplifies the military's sophisticated welfare infrastructure, operating as a semi-autonomous organization that reinvests commercial profits into welfare projects. With an annual welfare budget of Rs.1.6 billion (US$27.58 million), the FF maintains an extensive network of 276 welfare projects. These include 11 state-of-the-art hospitals, 23 medical centers equipped with modern facilities, 72 dispensaries providing primary healthcare, 90 educational institutions serving 40,000 students, 9 technical training centers specifically for men, and 66 vocational centers dedicated to women's skill development. The foundation's commercial ventures span various sectors including cement, fertilizer, power generation, and financial services.
However, this comprehensive welfare system creates significant political tensions, particularly regarding provincial resource distribution. The demographic composition of the armed forces reveals a stark regional imbalance - approximately 75% of military personnel originate from Punjab, specifically from three districts: Rawalpindi, Jhelum, and Chakwal. In the North-West Frontier Province (NWFP), recruitment is primarily concentrated in Kohat and Mardan districts. This concentration means that roughly 72% of military welfare funds are invested in Punjab, while other provinces receive disproportionately smaller allocations. Balochistan and Sindh, in particular, receive minimal welfare investments despite their significant population shares.
This recruitment pattern traces its roots to British colonial policies that designated certain ethnic groups as "martial races" - a classification that continues to influence modern military recruitment practices. The concentration of military business ventures in Punjab, including major industrial projects, housing schemes, and educational institutions, further intensifies regional disparities. Despite growing criticism and calls for reform, no effective mechanism exists to address this ethnic imbalance within the armed forces or ensure more equitable distribution of welfare resources across provinces. This perpetuates a cycle of regional inequality that extends beyond military service into broader socioeconomic development patterns across Pakistan.
Chapter 8
The Financial Cost of Milbus: Inefficiency and Opportunity Cost
Despite claims of superior management capabilities, military commercial ventures in Pakistan demonstrate significant financial inefficiency and systemic problems. The Army Welfare Trust (AWT), established in 1971 with a modest investment of Rs.700,000 (US$12,000), aggressively expanded into virtually all major economic sectors-including manufacturing, farming, real estate, insurance, and banking-reaching a substantial balance sheet of Rs.17.45 billion (US$300.86 million) by 2001. However, this rapid expansion masked serious operational issues, culminating in a staggering deficit of Rs.15 billion (US$258.62 million) by the same year.
Poor management decisions plagued the AWT's operations throughout the 1990s. A particularly catastrophic example was its ill-advised expansion into cement and pharmaceuticals sectors in 1996-97, financed through high-interest international loans during a period of economic instability. These ventures quickly ran into severe liquidity problems, forcing the AWT to repeatedly seek government intervention. The pattern of bailouts became increasingly frequent: Rs.5 billion in 1997, Rs.2.5 billion in 1999, and Rs.5.4 billion in 2001. Despite operating under the guise of a private enterprise, the AWT consistently leveraged its military connections to secure financial guarantees from the government-effectively socializing its losses while privatizing gains.
The Fauji Foundation (FF), established in 1953/54 with initial capital of Rs.18 million, presents a similarly concerning picture despite its reputation as the better performer among military foundations. By 2001, while its total assets had grown to Rs.43.32 billion, detailed financial analysis revealed significant operational inefficiencies. The foundation's sugar manufacturing operations proved particularly problematic-its plants showed combined losses of Rs.58.424 million, with annual losses reportedly reaching Rs.1 billion across sugar operations. These losses occurred despite preferential access to resources and regulatory advantages.
The Frontier Works Organization (FWO) further illustrates the endemic inefficiency within military-run enterprises. Despite marketing itself as a paragon of military operational excellence, Audit Report 179 exposed serious financial mismanagement. For the financial year 1999/2000, the organization ran a substantial deficit of Rs.4076.868 million, with receipts of Rs.4191.365 million failing to cover expenditure of Rs.5171.391 million. The resulting Rs.980.026 million shortfall required state intervention-directly contradicting FWO's claims of operational independence from government funding.
The opportunity costs of Pakistan's military economic empire extend far beyond direct financial losses. Military-controlled companies have established near-monopolistic positions in several crucial sectors-including cargo transportation, road construction, and fertilizer production-effectively stifling private sector competition and innovation. A prime example is the National Logistics Cell, which not only competed with Pakistan Railways but actively undermined it, creating a redundant parallel organization instead of supporting the improvement of existing infrastructure.
This military-industrial complex has fostered a particularly damaging form of crony capitalism, where influential political and private-sector actors maintain resource monopolies through their support of military interests. While certain business groups benefit from military partnerships-gaining preferential access to contracts, licenses, and regulatory approvals-many others suffer. Critics increasingly point to military capital as an hidden tax on the economy, creating both direct security costs and indirect damages through crowded-out private investment and reduced market efficiency. The military's expanding economic footprint has effectively created a parallel economy that operates under different rules than the civilian sector, distorting market mechanisms and hampering sustainable economic development.
Chapter 9
Milbus and Pakistan's Democratic Future
The military's economic interests raise fundamental questions about its willingness to return to barracks and allow democracy to flourish. This hidden military capital is particularly harmful in authoritarian states where the military extends its reach into all segments of society and economy. Unlike democracies where political players can control military economic activities, semi-authoritarian systems like Pakistan allow the armed forces to exploit resources with increasing appetite for power.
The military's system of privileges allows leadership to maintain officer support, particularly when acting against civilian regimes. Officers, especially brigadiers and above, comply with the service chief's will fearing loss of financial opportunities. Defense analyst Ikram Shegal notes that "the jump from a major-general is a major financial jump," making ambitious brigadiers unwilling to jeopardize promotion prospects.
The military's economic ventures directly reinforce its political control in a self-perpetuating cycle: political power guarantees economic benefits which motivate officers to maintain influence in governance. What began as simple budget allocations has evolved into comprehensive economic penetration, with the military justifying its role as the state's guardian.
A new hypothesis emerges connecting Milbus, the military's transformation into an elite class, and the rise of religious extremism. Pakistan, Indonesia, and Turkey - all countries with parent-guardian military dominance - share this pattern. When the military evolves from arbiter to dominant elite, it reduces political options, pushing people toward alternative ideologies like religion in the post-Cold War era.
Pakistan's military has nurtured religious parties and militant groups for national security objectives without realizing religious ideology's potential as an alternative power base. Despite claims of combating extremism, reports reveal the government's duplicitous approach toward militants. The military systematically uses religion to consolidate control while religious conservatism simultaneously grows among common people disillusioned with the existing system.
The path toward genuine democracy in Pakistan requires addressing the military's economic interests. As long as the officer corps has significant financial stakes in maintaining political influence, they will resist meaningful democratic reforms. Breaking this cycle requires strengthening civilian institutions, creating greater transparency around military businesses, and gradually reducing the armed forces' role in commercial activities. Only then can Pakistan hope to establish the civilian supremacy necessary for sustainable democratic governance.
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